From Urgent Cash Infusion to Clarity and Sustainability: The Email That Sparked A Cash Management Transformation
In the spirit of reflection this President’s Day, we revisit a pivotal moment from five years ago heading into the same President’s Day weekend when Matthew Mathison , a founding partner of MBL Partners , contemplated taking on a new venture that would challenge and ultimately crystallize one of our key approaches to cash management. Faced with an opportunity to steer a Private Equity-backed oilfield service company away from immediate financial peril, Matt, despite having no prior experience in the oilfield sector, penned an email to the leadership group that is applicable to any company today. That company’s particular distress signal, a desperate call for an additional cash infusion to make payroll the next week, struck a cord with him, sparking the initiation of a transformative journey for the Company and for our current cash management focus.
As Matt was thinking about the proposed opportunity to step in as an Interim CFO in an industry he had no experience in, he sent the following email, paraphrased for brevity and privacy, to the Sponsors and CEO below:
“If I were to begin on Monday Feb 25th (A week from today) and be tasked immediately with this interim CFO-type of role at the network company mentioned, I would ask for the following 3 things to be done this week ahead of my official start:
1) Send me the trailing 12 months of financials (Income, Balance and Cash Flow statement) and how that compared with the Projected/Budgeted figures for that same time period.
2) Summarize the top 5 reasons why the results differed from the budgeted plans – and why your planning proved ineffective in those variance areas. Did anything change in the process for making the projections and budget for the next 12 month period? And what is the current projections and budgets for the next 12 months?
3) If you had a magic pen and anything you wrote down could become true – what 3 things would you write down to change about your current business? I think those 3 things could be done in 30 minutes or less (assuming the financials and projections are in order and could just simply be pulled up from a system). But, I would really like to see and understand these answers as I would begin to help the network company. Enjoy your President’s Day and let me know your thoughts.”
A formal response to that email never came. Rather a series of verbal explanations and estimations that led to the realization that there was really no known understanding of state of the financials, other than the pain being felt by everyone by having to managing the day-to-day or week-to-week cash problems with no end in sight.
Could you respond to this email request in your current role quickly and thoughtfully and with the information requested? Could you pull the information and be able to spend time thinking about the reasons, or would this lead to an intense and embarrassing set of “all-nighters” to try and “get the reports” necessary to even think about these things?
I knew after this email request went unanswered that we would need to start from scratch in that situation. We needed to break all the complexities down and get down to the basics of truly what cash was coming in and what cash was going out of the business on a daily and weekly basis. We needed to get an entire organization to focus on this as a true life or death matter. What transpired over the next 7 days and then 90 days and then 2+ years was the makings of an incredible survivor’s story. One that was dependent on hard core, but very manual cash management. But one that led to getting capital needed to flip a negative credit cycle and upside down balance sheet and putting a business back into a stable place that eventually was able to even survive the oil field being shut down by negative oil prices and the COVID shut downs a few years ago. That business is still running today and I have a deep appreciation and admiration for those who rolled up their sleeves and did some brutally difficult cash management detail as part of that transformation.
The Thrive Playbook sets out to establish a baseline to answering 3 key questions: 1) Is this a good business (or can it be)? 2) Does the business have a team that is executing a sustainable and scalable process (or what will it take to install the right team and operating playbook)? And 3) Does the Company have the necessary cash and capital structure to grow, scale, overcome challenges and sustain (or how much is needed to get to that point)?
The cash management process ultimately establishes a baseline of truth. Once a business truly knows its unit economics and stares at its capital situation based on today’s true reality, only then can the key decisions be made to overcome or optimize. Without that baseline of truth known, it becomes a guessing game and one where last minute and urgent capital calls or cash infusions are required.
In our journey, the cornerstone of success has always been an unwavering commitment to reality, no matter how stark. The courage to confront the actual state of affairs is not just a business strategy; it's a philosophy that underpins sustainable change and growth. Our approach to cash management isn't just about monitoring inflows and outflows; it's about uncovering the truth beneath the numbers, establishing a foundation upon which a company can not only survive but thrive.
We don't just offer tools; we offer transformation. By understanding your unit economics and capital situation, we empower your business to make decisions that are not guesses but strategic moves towards optimization and excellence. We invite you to share in this commitment to truth, to participate in the culture of rigorous financial discipline, and to join us in the continuous pursuit of excellence. Your stories of adversity and triumph are the testimonies of this journey. Let’s keep the conversation going, and together, let’s build legacies of resilience and prosperity.